Efficiency wage

<p>In <a href="/facts/Labor_economics/RRlxNx0u">labor economics</a>, an efficiency wage is a wage paid in excess of the <a href="/facts/Market-clearing/m4EYJYTm">market-clearing</a> wage to increase the <a href="/facts/Labor_productivity/tvolIl5T">labor productivity</a> of workers. Specifically, it points to the incentive for managers to pay their employees more than the market-clearing wage to increase their <a href="/facts/Productivity/yXlzAjC2">productivity</a> or to reduce the costs associated with <a href="/facts/Turnover_(employment)/eKBLh3zY">employee turnover</a>.
</p><p>Theories of efficiency wages explain the existence of <a href="/facts/Involuntary_unemployment/Cpky0tHv">involuntary unemployment</a> in economies outside of <a href="/facts/Recession/ncYpUqmr">recessions</a>, providing for a <a href="/facts/Natural_rate_of_unemployment/lyU29aMg">natural rate of unemployment</a> above zero. Because workers are paid more than the equilibrium wage, workers may experience periods of <a href="/facts/Unemployment/qGzDQbWt">unemployment</a> in which workers compete for a limited supply of well-paying jobs.
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Efficiency wage